Your Guide to SBA Loans for Healthcare Practices
We have all heard the old adage, “It takes money to make money.” And the same holds true for healthcare practices. However, capital isn’t always something that healthcare practitioners—both established and new—have readily at their disposal. Therefore, it can appear challenging to start or expand a practice, which can leave many healthcare pros scratching their heads and wondering what their options are.
In this regard, an SBA loan can prove helpful—and potentially easy to obtain with the right partner.
In this blog, the team at LenDRgroup Consulting will offer an explainer about what you need to know about SBA loans, how they are used in financing for healthcare practices, and some pros and cons.
What is an SBA Loan?
An SBA loan is a loan for use by small businesses that is partially guaranteed by the government
on behalf of the Small Business Administration. In that regard, some of the risk is mitigated for the financial institution that is issuing the loan.
Ultimately, it is not the SBA who is responsible for doing the lending; rather it is the bank that has been approved by the SBA. And what this means is that if the borrower cannot pay the loan back, the SBA will cover the part of the loan that they guaranteed.
Here are the pros of SBA loans. They typically feature:
- Loan amounts up to $5M
- Repayment plans as long as 25 years
- Low down payments, typically only 10%
- Flexible spending on business expenses
How a Healthcare Practice Uses an SBA Loan
A healthcare practice can use an SBA loan for a wide range of business expenses, including:
- Buying or renovating a healthcare practice
- Refinancing debt
- Buying out a partner
- Purchasing an existing healthcare practice
- Purchasing or financing equipment or technology
- Working capital and covering day-to-day expenses, including rent, payroll, marketing,
Stating the obvious, SBA loans cannot be used for personal expenses.
Are There Any Cons?
Firstly, there can be a lengthy application process with an SBA loan and it can also be hard to identify the right lender to work with as different lenders have different internal rules associated with SBA loans.
Some additional hurdles include:
- Required collateral. SBA guidelines dictate that if you have at least 20% equity in your home, it will be used as collateral. Other collateral may also be considered.
- Inconsistencies with banks. It is common to be rejected by one bank but approved by another. This means that you will likely have to fill out multiple applications with multiple banks—a time-consuming process.
- There is a high failure rate. This fact alone makes it imperative to work with an SBA consulting service, like LenDRgroup, who has experience obtaining these types of loans for healthcare practices.
Work with LenDRgroup Consulting
Even in light of those cons that were just mentioned, there is good news. The LenDRgroup Consulting team has years of experience helping healthcare practices apply for—and successfully obtain—SBA loans. Plus, because we work with multiple lenders and financial institutions, you will be able to avoid filling out multiple applications at multiple banks, streamlining the process for you and saving you time.
We welcome the opportunity to speak with you about your SBA loan needs. Reach out to our team today and schedule a consultation.